Survivor Justice Tax Prevention Act
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The bill would exempt from federal income tax any damages, other than punitive damages, that a person receives from a lawsuit or settlement due to a sexual act or sexual contact, even without medical records or visible injuries.
It would also shift the burden of proof to the IRS to show such damages were not related to a sexual act if a settlement or judgment already says they were, and would require the IRS to publicize the new tax exclusion.
What this bill would do
What it would do
The bill would amend Section 104(a)(2) of the Internal Revenue Code so that damages (other than punitive damages) received from a judgment, award, or settlement on account of a sexual act or sexual contact are excluded from gross income, regardless of whether there are medical records or observable injuries. Currently, such exclusions generally require proof of a personal physical injury or physical sickness, which the IRS has interpreted to require observable bodily harm. The bill would also add a burden-of-proof rule: if a decision or settlement agreement states that damages are on account of a sexual act or sexual contact, that statement counts as credible evidence for tax purposes, and the IRS bears the burden of proving otherwise. It would apply to amounts received under decisions or agreements made after enactment, and would direct the Treasury Department to run a public-awareness campaign about the new exclusion, in consultation with the Department of Justice's Office on Violence Against Women.
Key provisions
- 1Would exclude from gross income damages (other than punitive damages) received on account of a sexual act or sexual contact, regardless of medical records or observable injury
- 2Would shift the burden of proof to the IRS if a settlement or judgment already states damages are on account of a sexual act or sexual contact
- 3Would apply the tax exclusion only to amounts received under decisions or agreements made after enactment, with special timing rules for payments and superseding agreements
- 4Clarifies that the amendment creates no inference about whether 'personal physical injuries or physical sickness' includes injuries without medical records or observable signs
- 5Would require the Treasury Department to run a public-awareness program about the new exclusion, in consultation with the Justice Department's Office on Violence Against Women
Who would be affected
Survivors of sexual assault or sexual contact who receive damages through lawsuits or settlements, the Internal Revenue Service, tax courts handling disputes over such damages, and the Treasury Department and Department of Justice's Office on Violence Against Women, which would jointly promote awareness of the exclusion.
Why it matters
Survivors who settle claims related to sexual acts or contact could keep more of their compensation without needing to prove physical injury, which advocates say has been a barrier under current IRS interpretation. The shifted burden of proof would make it harder for the IRS to tax such settlements as ordinary income.
What would change
Changes to existing law
Amends Internal Revenue Code Section 104(a)(2) (Sec. 2(a))
Adds a new category excluding damages for sexual acts or sexual contact from gross income, without requiring medical records or observable injury
Amends Internal Revenue Code Section 104 (Sec. 2(b))
Adds a new subsection (d) shifting the burden of proof to the IRS when a settlement already characterizes damages as sexual-act-related
Agencies directed to act
Effective dates
- The tax exclusion and burden-of-proof amendments
Funding and costs
Congressional Budget Office estimate
CBO estimates H.R. 2347 would reduce federal revenues by $89 million over the 2026–2036 period, increasing the deficit by that same amount, with no effect on direct spending.
The bill would allow survivors of sexual misconduct to exclude compensatory damages from their taxable income, even when injuries are not documented as physical — an exclusion not available under current law. The Joint Committee on Taxation estimates this would reduce revenues by $89 million over the 2026–2036 period ($42 million over 2026–2031), with no effect on direct (mandatory) spending. Administrative costs to the IRS for implementing the new exclusion and notifying eligible filers would be less than $500,000 annually, subject to appropriated funds. CBO identified no intergovernmental or private-sector mandates in the bill.
How implementation would work
The IRS would apply the new exclusion to amounts received under decisions or agreements made after enactment, including special timing rules distinguishing when a decision or agreement is treated as made. In tax disputes, if a settlement or judgment already characterizes damages as related to a sexual act or contact, that characterization would be treated as credible evidence, shifting the burden of proof to the IRS to show otherwise under existing burden-of-proof procedures in the tax code. Separately, the Treasury Secretary or a delegate would coordinate with the Department of Justice's Office on Violence Against Women and other federal agencies to run a public-awareness campaign explaining the exclusion to potential claimants.
Legislative status & sources
Latest action
Received in the Senate.
Official CRS summary
Show the CRS summaryHide the CRS summary
This bill excludes from gross income certain damages received by an individual due to any sexual act or sexual contact and establishes the applicable burden of proof in court proceedings regarding the characterization of such damages for federal tax purposes.
Under current law, amounts received as damages (other than punitive damages) from a judgment, award, or settlement of a claim may be excluded from gross income and, thus, are not subject to federal income tax, if attributable to a personal physical injury or physical sickness. The Internal Revenue Service (IRS) generally interprets personal physical injury to require observable bodily harm (e.g., bruising, cuts, swelling, or bleeding).
Under the bill, amounts received as damages (other than punitive damages) from a judgment, award, or settlement due to any sexual act or sexual conduct, whether or not there are medical records or observable injuries of such act or contact, may be excluded from gross income.
Further, if a judgment, award, or settlement states that damages are due to any sexual act or sexual conduct, then the IRS has the burden of proving otherwise in court proceedings related to the tax liability associated with such damages.
Finally, the bill requires the IRS to promote public awareness of the exclusion from gross income of damages related to any sexual act or sexual contact.
Legislative subjects
Assault and harassment offenses; Civil actions and liability; Crime victims; Income tax exclusion; Sex offenses; Taxation
Committee report
H. Rept. 119-599